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Internationalizing Like China

Author

Listed:
  • Christopher Clayton
  • Amanda Dos Santos
  • Matteo Maggiori
  • Jesse Schreger

Abstract

We empirically characterize how China is internationalizing the Renminbi by staggering the entry of different types of foreign investors into its domestic bond market and propose a dynamic reputation model to explain this strategy. Our framework rationalize China’s strategy as trying to build credibility as an international currency issuer while reducing the cost of capital flight. We provide a sufficient statistic to measure countries' reputation over time and show that it can be estimated using micro data on foreign investors' portfolios. We use our framework to explore how countries compete to become a reserve currency provider.

Suggested Citation

  • Christopher Clayton & Amanda Dos Santos & Matteo Maggiori & Jesse Schreger, 2022. "Internationalizing Like China," NBER Working Papers 30336, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:30336
    Note: AP CF EFG IFM ITI ME POL
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    References listed on IDEAS

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    Cited by:

    1. Colin Weiss, 2022. "Geopolitics and the U.S. Dollar's Future as a Reserve Currency," International Finance Discussion Papers 1359, Board of Governors of the Federal Reserve System (U.S.).
    2. Cortina Lorente,Juan Jose & Martinez Peria,Maria Soledad & Schmukler,Sergio L. & Xiao,Jasmine, 2023. "The Internationalization of China’s Equity Markets," Policy Research Working Paper Series 10513, The World Bank.

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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • F2 - International Economics - - International Factor Movements and International Business
    • F3 - International Economics - - International Finance

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